The Clawback Begins
The bankruptcy administrator for Terraform Labs has launched a $4 billion lawsuit against high-frequency trading giant Jump Trading, seeking to recover profits allegedly siphoned from the Terra network before its historic collapse. Filed by liquidator Todd Snyder in an Illinois federal court, the complaint accuses Jump of manipulating the price of TerraUSD (UST) to maintain its dollar peg, creating a “false sense of stability” that eventually cost investors over $40 billion.
The lawsuit targets Jump Trading, its co-founder William DiSomma, and former Jump Crypto President Kanav Kariya. It alleges the firm profited roughly $1.28 billion by selling LUNA tokens obtained at deep discounts, a reward for secretly propping up the ecosystem during an earlier crisis.
The ‘Secret Agreement’ of May 2021
While the 2022 death spiral made headlines, Snyder’s complaint focuses on a precursor event: the May 2021 de-pegging. When UST initially slipped from its $1 mark, the algorithm failed to self-correct. The filing alleges that instead of letting the market function, Terraform Labs founder Do Kwon struck a clandestine deal with Jump.
Jump reportedly purchased massive quantities of UST on the open market to force the price back to $1. Publicly, Terraform Labs cited the recovery as proof of the algorithm’s resilience. Privately, they allegedly amended Jump’s market-making terms to provide LUNA tokens at roughly $0.40, even as the asset traded above $90 in the secondary market.
The intervention created a mirage of stability, enticing billions in fresh capital into a structurally doomed system.
The Billion-Dollar Exit
The liquidator claims this arrangement allowed Jump to exit its position with a $1.28 billion profit before the final crash in May 2022. The suit argues these funds belong to the creditors of the now-defunct Terraform Labs. This legal action follows a pattern of scrutiny. During earlier SEC proceedings, former Jump Crypto President Kanav Kariya reportedly asserted his Fifth Amendment rights when questioned about the firm’s relationship with Do Kwon.
Market Reaction
The remnants of the Terra network showed little reaction to the filing, with the community largely resigned to the liquidation process. Terra Luna Classic (LUNC) hovered around $0.000037 (-3.6%), while the defunct stablecoin USTC traded at $0.007. Jump Trading has since retreated significantly from the crypto sector, spinning off parts of its digital asset division amid mounting regulatory pressure.
